GST impact: Small businesses could under-report income initially

Some may lose competitiveness due to higher compliance costs

When the nationwide goods and service tax rolls out on July 1, it is likely that micro and small enterprises will under-report their yearly income. Firms might do so to stay in the Rs 20-50 lakh bracket so that a low tax rate of 1-2 per cent applies to them.

Increased compliance under GST will benefit firms in the long run by providing them access to cheaper capital and lower input costs, in the short term, the switch from the unorganised to organised sector will make them less competitive.

GST, in its current proposed form, exempts small businesses below Rs 20 lakh